-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UjCD7XumnOIX0K9X83XZxUclqvkYkDANsJzAYfSWLlAmNVbSSm/c7SGrqdCJlvzx 7hvdtS6YK4N6hSTuj7FEkA== 0000891020-95-000520.txt : 19951119 0000891020-95-000520.hdr.sgml : 19951119 ACCESSION NUMBER: 0000891020-95-000520 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: POPE & TALBOT INC /DE/ CENTRAL INDEX KEY: 0000311871 STANDARD INDUSTRIAL CLASSIFICATION: PAPER MILLS [2621] IRS NUMBER: 940777139 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07852 FILM NUMBER: 95590752 BUSINESS ADDRESS: STREET 1: 1500 SW FIRST AVE CITY: PORTLAND STATE: OR ZIP: 97201 BUSINESS PHONE: 5032289161 MAIL ADDRESS: STREET 1: 1500 S W FIRST AVE CITY: PORTLAND STATE: OR ZIP: 97201 10-Q 1 FORM 10-Q FOR THE PERIOD ENDING 9/30/95 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------- ---------- Commission File No. 1-7852 -------- POPE & TALBOT, INC. --------------------- Delaware 94-0777139 - ---------------------------------------- ------------------------------------- (State or other jurisdiction of I.R.S. Employer Identification Number incorporation or organization) 1500 S.W. 1st Ave., Portland, Oregon 97201 - ---------------------------------------- ------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (503) 228-9161 ------------------ NONE - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the latest practicable date. Common stock, $1 par value - 13,363,779 shares as of November 3, 1995 2 PART I. FINANCIAL INFORMATION
Page No. -------- ITEM 1. Financial Statements: Consolidated Condensed Balance Sheets - September 30, 1995 and December 31, 1994 2 Consolidated Statements of Income - Three and Nine Months Ended September 30, 1995 and 1994 3 Consolidated Condensed Statements of Cash Flows - Three and Nine Months Ended September 30, 1995 and 1994 4 Notes to Consolidated Condensed Financial Statements 5 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6-8 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings 9 ITEM 6. Exhibits and Reports on Form 8-K 9-11
3 PART I. POPE & TALBOT, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (Dollars in Thousands)
September 30, December 31, 1995 1994 ----------------- ---------------- ASSETS ------ Current assets: Cash and cash equivalents $ 4,475 $ 6,847 Accounts receivable 69,086 71,477 Inventories: Raw materials 52,579 81,156 Finished goods 39,903 46,236 --------- --------- 92,482 127,392 Deposits on timber purchase contracts 4,022 5,997 Prepaid expenses 12,433 11,337 --------- --------- Total current assets 182,498 223,050 Properties: Plant and equipment 571,039 548,430 Accumulated depreciation (305,031) (276,465) --------- --------- 266,008 271,965 Land and timber cutting rights 11,090 10,862 --------- --------- Total properties 277,098 282,827 Other assets: Restricted bond funds 851 15,458 Deferred charges 21,638 13,853 Goodwill, net of amortization 4,071 4,196 Deferred income tax assets, net 8,758 - --------- --------- Total other assets 35,318 33,507 --------- --------- $ 494,914 $ 539,384 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Notes payable $ 15,000 $ 20,000 Current portion of long-term debt 928 928 Accounts payable and accrued liabilities 63,102 74,048 Income taxes 1,641 8,600 --------- --------- Total current liabilities 80,671 103,576 Noncurrent liabilities: Reforestation 16,441 15,136 Postretirement benefits 14,272 13,641 Long-term debt, net of current portion 177,152 177,471 Deferred income tax liabilities, net - 1,365 --------- --------- Total noncurrent liabilities 207,865 207,613 Stockholders' equity: Common stock 13,972 13,972 Additional paid-in capital 40,860 40,858 Retained earnings 167,297 191,804 Cumulative translation adjustments (4,640) (7,315) Less treasury shares at cost (11,111) (11,124) --------- --------- Total stockholders' equity 206,378 228,195 --------- --------- $ 494,914 $ 539,384 ========= =========
The accompanying notes are an integral part of these consolidated condensed balance sheets. 2 4 POPE & TALBOT, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Dollars in Thousands Except Per Share Amounts)
Three months ended Nine months ended September 30, September 30, -------------------------- -------------------------- 1995 1994 1995 1994 ---- ---- ---- ---- Revenues: Wood products $ 67,237 $ 73,033 $ 198,667 $ 228,771 Pulp and paper products 104,306 98,221 304,962 269,144 ----------- ----------- ----------- ----------- Total 171,543 171,254 503,629 497,915 Costs and expenses: Cost of sales: Wood products 65,121 62,008 193,529 178,114 Pulp and paper products 103,585 95,976 301,406 268,505 Selling, general and administrative 8,296 8,209 24,136 22,756 Interest, net 3,567 2,867 10,695 7,675 ----------- ----------- ----------- ----------- Total 180,569 169,060 529,766 477,050 Income (loss) before income taxes (9,026) 2,194 (26,137) 20,865 Income tax provision (benefit) (2,381) 1,273 (9,247) 8,555 ----------- ----------- ----------- ----------- Net income (loss) $ (6,645) $ 921 $ (16,890) $ 12,310 =========== =========== =========== =========== Net income (loss) per common share: Primary $(.49) $.07 $(1.26) $.95 ===== ==== ====== ==== Fully diluted $(.49) $.07 $(1.26) $.93 ===== ==== ======= ==== Cash dividends per common share $ .19 $.19 $ .57 $.57 ===== ==== ====== ==== Weighted average number of common shares outstanding: Primary 13,363,779 13,362,729 13,363,433 13,024,349 =========== =========== =========== =========== Fully diluted 13,363,779 13,362,729 13,363,433 13,500,946 =========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated condensed financial statements. 3 5 POPE & TALBOT, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in Thousands)
Three months ended Nine months ended September 30, September 30, ----------------------- ------------------------ 1995 1994 1995 1994 ---- ---- ---- ---- Cash flow from operating activities: Net income (loss) $ (6,645) $ 921 $(16,890) $ 12,310 Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Depreciation and amortization 11,263 10,050 32,775 28,472 Increase (decrease) in: Accounts payable and accrued liabilities 7,398 13,255 (10,946) (301) Income taxes (1,099) 2,260 (6,959) (12,699) Reforestation 23 47 613 772 Postretirement benefits 196 265 631 776 Deferred income taxes, net (2,740) (6,175) (10,105) (6,175) Decrease (increase) in: Accounts receivable 904 (2,168) 2,391 (7,943) Inventories 7,975 (9,935) 34,910 (15,414) Deposits on timber purchase contracts 2,547 (2,103) 147 (2,739) Prepaid expenses 847 (568) (1,096) (1,675) Deferred charges and other (936) 2,367 (4,573) (144) -------- -------- -------- -------- Net cash provided by (used for) operating activities 19,733 8,216 20,898 (4,760) Cash flow from investing activities: Capital expenditures (6,901) (12,459) (25,443) (48,073) Proceeds from sale of other properties 186 193 487 199 -------- -------- -------- -------- Net cash used for investing activities (6,715) (12,266) (24,956) (47,874) Cash flow from financing activities: Net increase (decrease) in short-term borrowings (11,200) (1,000) (5,000) 9,000 Proceeds from issuance of long-term debt - 10,000 - 50,000 Reduction of long-term debt (108) (101) (319) (298) Decrease in restricted bond funds 4,987 - 14,607 - Cash dividends (2,539) (2,538) (7,617) (7,315) Net proceeds from issuance of treasury stock - - 15 1,927 -------- -------- -------- -------- Net cash provided by (used for) financing activities (8,860) 6,361 1,686 53,314 -------- -------- -------- -------- Increase (decrease) in cash and cash equivalents 4,158 2,311 (2,372) 680 Cash and cash equivalents at beginning of period 317 2,137 6,847 3,768 -------- -------- -------- -------- Cash and cash equivalents at end of period $ 4,475 $ 4,448 $ 4,475 $ 4,448 ======== ======== ======== ========
The accompanying notes are an integral part of these consolidated condensed financial statements. 4 6 POPE & TALBOT, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS September 30, 1995 and 1994 (Unaudited) 1. General The consolidated condensed interim financial statements have been prepared by the Company without audit and are subject to normal recurring year-end adjustments. Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments (all of which are of a normal recurring nature) necessary to present fairly the financial position of the Company as of September 30, 1995 and December 31, 1994, and the results of operations and changes in cash flows for the three and nine months ended September 30, 1995 and 1994. It is suggested that these interim statements be read in conjunction with the financial statements and notes thereto contained in the Company's 1994 report on Form 10-K. The results of operations for the three and nine months ended September 30, 1995 and 1994 are not necessarily indicative of the results to be expected for the full year. 2. Income Taxes The income tax provision is estimated on an interim basis using the best available information for projected results for the entire year. 3. Earnings per Share Per share information is based on the weighted average number of common shares outstanding during each period. The computation includes the assumed issuance of common shares under the Stock Option and Appreciation Plan, net of an assumed buyback of treasury shares at the average market price. Refer to Exhibit 11.1 of this filing for the computation of average common shares outstanding and earnings per share. 4. Debt In 1995, the Company's unsecured revolving-credit agreement and its uncommitted short-term lines of credit were modified. The modified agreements provide for $100 million of available credit of which $80 million was outstanding at September 30, 1995. 5. Litigation and Legal Matters Reference is made to PART II, ITEM 1, "Legal Proceedings" with respect to recent developments in a tax dispute. 5 7 POPE & TALBOT, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SEPTEMBER 30, 1995 AND 1994 (unaudited) RESULTS OF OPERATIONS - --------------------- Continued losses in the Company's pulp and paper segment were greater than profits from the wood products segment resulting in a loss for the third quarter of 1995. The third quarter loss of $6.6 million, or $.49 per share, was an improvement over the second quarter loss of $9.0 million, or $.68 per share, but was worse than the $900,000, or $.07 per share, of income in the third quarter of 1994. Third quarter 1995 revenues were essentially unchanged from the third quarter of 1994 as lower revenue levels resulting from lower lumber, tissue and diaper sales volumes were offset by higher pulp pricing. The wood products segment, which comprised approximately 39 percent of third quarter sales, was profitable in the third quarter of 1995 after a second quarter 1995 loss. Third quarter income was $1.2 million and compared to a second quarter 1995 loss of $2.5 million and a third quarter 1994 income of $9.7 million. The third quarter 1994 income included a $3.7 million refund of a portion of a tariff eliminated by the United States Government on Canadian lumber sold in the United States. The remainder of the tariff refund was recognized in the fourth quarter of 1994. Lumber pricing improved from the second quarter of 1995 when prices, at their lowest level, reached their lowest point since 1992. These third quarter prices were, however, 15 percent lower than prices in the third quarter of 1994. Lumber sales volume decreased to 149 million board feet, or approximately 82 percent of capacity in the third quarter of 1995 from approximately 162 million board feet in both the second quarter of 1995 and the third quarter of 1994. The second quarter sales volume was approximately 90 percent of 1995 capacity. The third quarter 1994 sales volume was 80 percent of 1994 capacity and the below-capacity volumes were due to operating inefficiencies caused by poor log quality at the Company's Canadian sawmills and shutdown for a portion of the third quarter of 1994 of the Port Gamble sawmill due to poor lumber prices. The below-capacity volumes in the third quarter of 1995 were due almost entirely to closure for a significant portion of the third quarter of the Port Gamble sawmill due to poor lumber prices. During the third quarter of 1995, the Company announced that it will permanently close the Port Gamble sawmill by the end of 1995 due to a continuing inability to obtain acceptably priced logs. At the beginning of 1995, the Company reduced its Grand Forks, British Columbia sawmill from two shifts to one shift due to a lack of available timber. With the closure of the Port Gamble sawmill and reduction of Grand Forks to one shift, the Company's overall annual lumber capacity is now approximately 575 million board feet. The third quarter 1995 pulp and paper segment loss of $4.7 million was an improvement over the second quarter 1995 loss of $6.8 million, but worse than the third quarter 1994 loss of $2.2 million. A strong pulp market in 1995 returned the Company's pulp business to profitability in 1995 after incurring losses in 1994. The Company's tissue and diaper businesses continued to generate losses in the third quarter of 1995 as competitive market conditions, high fluff pulp and wastepaper costs and strike-related costs at the Company's Ransom tissue mill continued into the third quarter. 6 8 Pulp prices continued to strengthen in the third quarter of 1995 resulting in further improvement in pulp earnings. Pulp losses declined steadily throughout 1994 and the Company's pulp business, which comprised 25 percent of third quarter sales, returned to profitability in the fourth quarter of 1994. Pulp sales prices improved again in the third quarter, although at a slower pace than in the second quarter, with average third quarter prices increasing approximately 7 percent from average prices in the second quarter of 1995 and about 80 percent from one year ago. Although pulp prices have increased, prices for wood chips, a primary raw material for pulp production have also increased. Chip prices increased rapidly in the first half of 1995, declined in the third quarter from second quarter levels, and were approximately 66 percent higher in the third quarter of 1995 compared to the third quarter of 1994. To expand the source of fiber for the Halsey pulp mill, the Company in 1994 began using sawdust as an additional fiber source. Sawdust is currently in adequate supply and has not increased in price as wood chips have. During the third quarter of 1995, approximately 49 percent of Halsey's pulp mill production was from sawdust. During the third quarter of 1995, the Company's Halsey pulp mill operated at slightly greater-than-rated capacity although sales volumes were slightly below capacity as a Northwest customer phased out of using the Company's pulp. The Company does not anticipate that the loss of this customer will have a significant effect on overall Company pulp sales as the Company is currently selling increased volumes of pulp to foreign customers. The losses during the third quarter of 1994 were due primarily to volume shipped under pricing arrangements which were below then-current industry pricing. Those contracts expired late in the third quarter of 1994. The Company's tissue business, which comprised approximately 13 percent of third quarter 1995 sales again incurred a significant loss in the third quarter, although the loss was smaller than the second quarter 1995 loss. Tissue prices, which have been either flat or declining since 1990, realized the first general price increases since 1990 during the first half of 1995. Tissue pricing continued to improve in the third quarter of 1995, with average sales prices approximately 20 percent higher than the third quarter of 1994 and about 12 percent higher than the second quarter of 1995. Although tissue pricing has improved, pricing for wastepaper, the primary raw material component for tissue, has also increased substantially during 1995. Wastepaper pricing, which has generally followed the pricing trends of world pulp markets, has been pushed to record levels by a combination of strong pulp markets and a shortage of certain wastepaper grades caused primarily by the start-up in 1994 of new recycled fiber mills in the United States. As a result of these pressures, the Company's wastepaper costs have more than doubled since the third quarter of 1994, although prices did begin to stabilize in the third quarter of 1995 and declined from the record levels reached in the second quarter of 1995. The tissue market has been, and continues to be, extremely competitive. The majority of the tissue losses have been incurred at the Company's Ransom tissue mill and to reduce these losses the Company implemented a labor contract having a revised, lower compensation structure for the Ransom employees during the second quarter of 1995. The union employees went on strike over this wage structure implementation and the mill is currently operating on a curtailed basis with salaried and temporary workers. The loss at Ransom was further increased by higher shipping and packaging costs incurred to supply some of the Company's East Coast customers. The long-term viability of the mill remains uncertain unless a combination of a satisfactory resolution of the labor situation, lower other manufacturing costs, including raw materials, and stable pricing make it advantageous to operate the mill. The Ransom tissue mill represents approximately 50 percent of the Company's tissue capacity and 7 9 as a result of the strike at Ransom, tissue operated at approximately 58 percent of capacity during the third quarter of 1995. The Company's other tissue mill, at Eau Claire, Wisconsin, operated at capacity during the third quarter of 1995. The Company's diaper business, which comprised approximately 23 percent of third quarter 1995 sales, incurred a loss in the third quarter of 1995 compared to the third quarter of 1994 when diapers produced a small profit. The third quarter 1995 loss approximated the diaper loss incurred in the second quarter of 1995. Procter & Gamble, a significant producer of disposable diapers, continued to attempt to gain market share through aggressive pricing. As a result of Procter & Gamble's pricing, prices for the Company's diapers declined in the third quarter of 1995 approximately 2 percent from the second quarter of 1995 and 4 percent from the third quarter of 1994. Diaper sales volumes were approximately 80 percent of capacity in the third quarter of 1995. This was an improvement over the first half of 1995, when diapers operated at approximately 72 percent of capacity as a result of branded producers instituting packaging count reductions which the Company did not complete until late in the second quarter. Contributing to the diaper losses has also been rising costs for fluff pulp, a primary component for disposable diapers. Costs for fluff pulp have not risen as fast as world pulp markets, but are still 60 percent higher than the third quarter of 1994. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- During the first nine months of 1995, operations generated cash of $20.9 million and for the third quarter of 1995 generated cash of $19.7 million. Income before non-cash charges for depreciation and amortization generated $15.9 million of cash during the first nine months. Efforts to reduce inventories from year-end 1994 levels generated cash of $34.9 million during the first nine months of 1995. The most significant inventory reductions have been liquidating the Port Gamble inventory in preparation for its permanent closure, reductions in Canadian log inventories and reductions in tissue and diaper inventories. Pulp inventories have increased as a result of the longer lead times required for shipping to export customers. Approximately $11 million of cash was used in the first nine months of 1995 as accounts payable and accrued liabilities declined due to timing of payments. Capital spending for the first half of 1995 was $25.4 million, of which $16.5 million was related to completion of a project to modernize the recycled pulping operations at the Eau Claire tissue facility. In 1994, the Company obtained restricted funding to finance this pulp modernization project. The remaining expenditures were for various smaller projects to sustain existing operations. The Company is currently restricting capital spending to only those projects to sustain existing operations, and accordingly the company anticipates that approximately $2 million will be required to complete previously approved projects and only minimal additional projects will be undertaken for the remainder of 1995, primarily to sustain existing operations. It is anticipated that capital spending for the remainder of the year will be financed from internally generated cash and, if necessary, from the Company's lines of credit. Year to date 1995, the Company has returned $7.6 million to shareholders in the form of dividends. The Company currently has $100 million available under a long-term revolving credit agreement, of which $80 million was outstanding at September 30, 1995. 8 10 PART II. ITEM 1. Legal Proceedings In 1985, shareholders of the Company approved a Plan of Distribution pursuant to which all of the Company's timber properties and the development properties and related assets and liabilities in the State of Washington were transferred to newly-formed Pope Resources, A Delaware Limited Partnership, with interests in the partnership distributed to the Company's shareholders on a pro rata basis. The Company assigned to the assets transferred a distribution value for federal income tax purposes based upon the public trading price of the partnership interests at the time of distribution. The Internal Revenue Service has asserted that the Company owes additional federal income tax in the amount of approximately $14 million (plus applicable interest) in connection with this transaction and the Company has disputed this asserted tax liability. The issue was heard in U.S. Tax Court during the third quarter 1995 and follow-up legal briefs are being filed until late December 1995. The Tax Court will not render a decision until after the briefs are filed with a likely outcome not known until mid 1996. The Company will continue to vigorously contest the assessed tax liability through independent tax counsel. The Company believes, based upon consultation with independent tax counsel, that the additional tax due in this matter, if any, will ultimately be significantly less than the assessed amount and will not have a material adverse effect on the Company's financial position. The final tax settlement, if any, will be recognized as a reduction in equity with respect to the partnership transaction. ITEM 6. Exhibits and Reports on Form 8-K Exhibits -------- 3.1 Certificate of Incorporation, as amended. (Incorporated herein by reference to Exhibit 3(a) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.) 3.2 Bylaws. (Incorporated herein by reference to Exhibit 3(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.) 4.1 Indenture, dated June 2, 1993, between the Company and Chemical Trust Company of California as Trustee with respect to the Company's 8-3/8% Debentures due 2013. (Incorporated herein by reference to Exhibit 4.1 to the Company's registration statement on Form S-3 filed April 6, 1993.) 4.2 Revolving Credit Agreement, dated May 6, 1992, among the Company and United States National Bank of Oregon; CIBC, Inc.; ABN AMRO Bank N.V.; Continental Bank N.A.; and Wachovia Bank of Georgia, National Association. (Incorporated herein by reference to Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1992.) 4.3 Rights Agreement, dated as of April 13, 1988, between the Company and The Bank of California, as rights agent. (Incorporated herein by reference to Exhibit 4(e) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.) 9 11 4.4 Extension Agreement, dated as of June 30, 1994, to the Revolving Credit Agreement, dated May 6, 1992, among the Company and United States National Bank of Oregon; CIBC, Inc.; ABN AMRO Bank N.V.; Continental Bank N.A.; and Wachovia Bank of Georgia, National Association. (Incorporated herein by reference to Exhibit 4.6 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994.) 4.5 Modification Agreement, dated as of October 31, 1994, to the Revolving Credit Agreement, dated May 6, 1992, among the Company and United States National Bank of Oregon; CIBC, Inc.; ABN AMRO Bank N.V.; Continental Bank N.A.; and Wachovia Bank of Georgia, National Association. (Incorporated herein by reference to Exhibit 4.7 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994.) 4.6 Modification Agreement, dated as of December 31, 1994, to the Revolving Credit Agreement, dated May 6, 1992, among the Company and United States National Bank of Oregon; CIBC, Inc.; ABN AMRO Bank N.V.; Continental Bank N.A.; and Wachovia Bank of Georgia, National Association. (Incorporated herein by reference to Exhibit 4.8 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994.) 4.7 Extension/Modification Agreement, dated as of June 30, 1995, to the Revolving Credit Agreement, dated May 6, 1992, among the Company and United States National Bank of Oregon; CIBC, Inc.; ABN AMRO Bank N.V.; Bank of America Illinois, fka Continental Bank; and Wachovia Bank of Georgia, National Association. (Incorporated herein by reference to Exhibit 4.7 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995.) 4.8 Modification Agreement, dated as of October 16, 1995, to the Revolving Credit Agreement, dated May 6, 1992, among the Company and United States National Bank of Oregon; CIBC, Inc.; ABN AMRO Bank N.V.; Bank of America Illinois; and Wachovia Bank of Georgia, National Association. 10.1 Executive Compensation Plans and Arrangements --------------------------------------------- 10.1.1 Stock Option and Appreciation Plan. (Incorporated herein by reference to Exhibit 10(a) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.) 10.1.2 Executive Incentive Plan. (Incorporated herein by reference to Exhibit 10(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.) 10.1.3 Restricted Stock Bonus Plan. (Incorporated herein by reference to Exhibit 10(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.) 10.1.4 Deferral Election Plan. (Incorporated herein by reference to Exhibit 10(d) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.) 10.1.5 Supplemental Executive Retirement Income Plan. (Incorporated herein by reference to Exhibit 10(e) to the Company's Annual Report on Form 10-K for the year ended December 31, 1990.) 10 12 10.1.6 Form of Severance Pay Agreement among the Company and certain of its executive officers. (Incorporated herein by reference to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the year ended December 31, 1990.) 10.2 Lease agreement between the Company and Pope Resources, dated December 20, 1985, for Port Gamble, Washington sawmill site. (Incorporated herein by reference to Exhibit 10(g) to the Company's Annual Report on Form 10-K for the year ended December 31, 1990.) 10.3 Lease agreement between the Company and Shenandoah Development Group, Ltd., dated March 14, 1988, for Atlanta diaper mill site as amended September 1, 1988 and August 30, 1989. (Incorporated herein by reference to Exhibit 10(h) to the Company's Annual Report on Form 10-K for the year ended December 31, 1990.) 10.4 Lease agreement between the Company and Shenandoah Development Group, Ltd., dated July 31, 1989, for additional facilities at Atlanta diaper mill as amended August 30, 1989 and February 1990. (Incorporated herein by reference to Exhibit 10(i) to the Company's Annual Report on Form 10-K for the year ended December 31, 1990.) 10.5 Grays Harbor Paper L.P. Amended and Restated Pulp Sales Supply Contract, dated September 28, 1994 (with certain confidential information deleted). (Incorporated herein by reference to Exhibit 10(j) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994.) 11.1 Statement regarding computation of per share earnings. 27.1 Financial Data Schedule. The undersigned registrant hereby undertakes to file with the Commission a copy of any agreement not filed under exhibit item (4) above on the basis of the exemption set forth in the Commission's rules and regulations. Reports on Form 8-K ------------------- No reports on Form 8-K were filed during the three months ended September 30, 1995. 11 13 POPE & TALBOT, INC. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. POPE & TALBOT, INC. ----------------------------- Registrant Date: November 13, 1995 /s/ C. Lamadrid ----------------------------- By: C. Lamadrid Senior Vice President and Chief Financial Officer EX-4.8 2 MODIFICATION AGREEMENT 1 Exhibit 4.8 MODIFICATION AGREEMENT This modification agreement is dated as of October 16, 1995, and is among POPE & TALBOT, INC., a Delaware corporation ("Borrower"), UNITED STATES NATIONAL BANK OF OREGON ("U.S. Bank"), CIBC, INC. ("CIBC"), ABN AMRO BANK N.V. ("ABN"), BANK OF AMERICA ILLINOIS ("BofA"), and WACHOVIA BANK OF GEORGIA, N.A. ("Wachovia"). Recitals A. U.S. Bank, CIBC, ABN, BofA, and Wachovia (individually "Bank" and collectively "Banks") are parties to a credit agreement dated as of May 6, 1992, as modified (the "Credit Agreement"). All of the capitalized terms used in this modification agreement are defined by the Credit Agreement. B. Borrower has notified U.S. Bank as agent for Banks that Borrower may not be in compliance with the Interest Coverage Ratio specified in section 5.01(h)(iv) of the Credit Agreement as of September 30, 1995. C. Borrower and Banks desire to enter into this modification agreement to modify the Credit Agreement. NOW, THEREFORE, for value, Borrower and Banks agree that: 1. Temporary Change in Interest Coverage Ratio. The minimum Interest Coverage Ratio that Borrower must maintain will be: a. 2.80 to 1 for the four-quarter period ending on September 30, 1995; b. 2.45 to 1 for the four-quarter period ending on December 31, 1995; c. 2.75 to 1 for the four-quarter period ending on March 31, 1996; and d. 3.50 to 1 for each rolling four-quarter period ending on June 30, 1996, and on the last day of each calendar quarter thereafter. 2. Change in Pricing. Effective immediately and continuing until Borrower meets or exceeds an Interest Coverage Ratio of 3.5 to 1, the pricing on existing and future advances will be the highest provided in the pricing grid (the Interbank Margin on existing and future advances = 75.00 basis points ("bps"), the Commitment Fee = 25.00 bps, and the Unused Fee = 10.00 bps). The foregoing pricing will continue in effect even if Borrower is in compliance with the Leverage Ratio which might, except for this paragraph, result in lower pricing. -1- 2 3. Modification Fee. Borrower promises to pay a modification fee of $50,000 to Banks in care of Agent. Agent will distribute each Bank's prorata share of such fee to each Bank. 4. Reduction in Revolving Line of Credit. The Aggregate Commitment will be reduced from $100 million to $85 million effective as of March 31, 1996, and from $85 million to $75 million as of June 30, 1996. Each such reduction will be prorata among Banks. Borrower will pay to Banks without notice or demand on a prorata basis all outstanding advances that exceed the Aggregate Commitment on the effective date of each such reduction in the Aggregate Commitment. 5. Financial Reporting. Section 5.01(i) of the Credit Agreement is modified to also require Borrower to deliver: a. Monthly company-prepared Financial Statements within 30 days following the end of each calendar month; and b. Quarterly company-prepared, consolidating Financial Statements within 45 days following the end of each of the first three calendar quarters of each Fiscal Year and within 90 days following the end of each Fiscal Year. 6. Negative Covenants. Section 5.02(a) of the Credit Agreement is modified to prohibit a transfer by Borrower or any of its Subsidiaries of more than 5% of such organization's assets except for sales of inventory and surplus or obsolete equipment and collection of accounts in the ordinary course of business and for acquisition of Subsidiaries or assets subject to existing encumbrances, security interests or liens. A new negative covenant is added as section 5.04 as follows: "5.04 Additional Debt. Except for trade debt incurred in the ordinary course of business and a guaranty to be issued to Wachovia to support the $19,552,000 reimbursement liability of Pope & Talbot, Wis., Inc. under a reimbursement and security agreement dated as of November 1, 1994 (the "P&T, Wis Liability"), Borrower will not allow its Canadian Subsidiary, Pope & Talbot, Ltd., a British Columbia corporation ("P&T Canada"), to borrow money from any person (individual, organization, or governmental unit) except Borrower or to otherwise incur debt (liability on a claim) for borrowed money without the prior written consent of Majority Banks." 7. Guaranties by Significant Subsidiaries. Borrower promises and agrees to cause each "Significant Subsidiary" (a Subsidiary contributing 5% or more of Borrower's consolidated assets) to unconditionally guarantee payment of the Loans and performance of the P&T, Wis Liability on a prorata basis in a form acceptable to Banks within 30 days following the date of this agreement. -2- 3 All such guaranties will include, among other terms, (a) a waiver of claims and defenses based on recoupment, any disability or defense of Borrower other than payment (including claims such as failure of consideration, duress, lack of capacity, illegality, fraud, statute of limitations, accord and satisfaction, impairment of recourse, discharge of Borrower through insolvency proceedings or otherwise, the manner, order, or timing of any foreclosure or disposition rights, or the forbearance by Bank of or with respect to any right or remedy that it may have against Borrower, the collateral, or any other guarantor), and/or suretyship (including extension of due dates, material modifications, and impairment of rights of recourse and/or of collateral) and (b) an agreement for mandatory arbitration of disputes. Notwithstanding the foregoing, P&T Canada and any other Significant Subsidiaries which are not incorporated in the United States (a "foreign Significant Subsidiary") will not issue such a guaranty but will, instead, either (a) subordinate their claims against Borrower to the claims of Banks against Borrower to assure Banks that their claims against Borrower will be fully satisfied by payment before any foreign Significant Subsidiary receives any payment on account of its claims against Borrower or (b) provide such other financial assurances or accommodations as Banks may consider reasonable under the circumstances. The failure of Borrower to obtain and deliver such guaranties and subordinations within such 30-day period will constitute an event of Default under the Loan Documents. 8. Subordination. Effective upon an event of Default under the Loan Documents, Borrower hereby subordinates its present and future claims against and equity interests in the non-foreign Significant Subsidiaries to the present and future claims of Banks against the non-foreign Significant Subsidiaries under the guaranties required by section 7 of this agreement to assure Banks that their claims against the non-foreign Significant Subsidiaries will be fully satisfied by payment before Borrower receives any payment or distribution on account of its claims and/or equity interests after such event of Default. 9. Miscellaneous. The parties agree to issue any additional documents and instruments reasonably necessary to effectuate the objectives of this modification agreement. The Loan Documents will continue in full force and effect as modified by this modification agreement. This modification agreement may be signed in one or more counterparts but all such counterparts will constitute but one agreement. The Loan Documents, as modified by this modification agreement, are intended to be the complete, final, and exclusive statement of the terms upon which Banks make their Individual Commitments to Borrower and Borrower promises to repay Loans. -3- 4 10. Effective Date. This modification agreement will become effective only when U.S. Bank, in its capacity as administrative agent for Banks, has received (a) by facsimile the signature page signed by Borrower and the signature page(s) signed by Majority Banks and (b) the modification fee. If Borrower or a Bank delivers a facsimile of its signature, such delivery will constitute the promise of such person to deliver sufficient copies of the manually signed signature page for distribution to each other party to the Credit Agreement. POPE & TALBOT, INC. UNITED STATES NATIONAL BANK OF OREGON By /s/ Peter T. Pope By /s/ Janice T. Thede --------------------------------- ---------------------------------- Peter T. Pope Janice T. Thede Chairman of the Board Vice President -4- 5 CIBC INC. ABN AMRO BANK N.V. By /s/ Ray Mendoza By /s/ Leif H. Olsson ------------------------------- ---------------------------------- Ray Mendoza Leif H. Olsson Vice President Group Vice President By /s/ David McGinnis ---------------------------------- David McGinnis Vice President BANK OF AMERICA ILLINOIS WACHOVIA BANK OF GEORGIA, NATIONAL ASSOCIATION By /s/ Michael J. Balok By /s/ William F. Hamlet ------------------------------- ---------------------------------- Michael J. Balok William F. Hamlet Vice President Senior Vice President -5- EX-11.1 3 COMPUTATION OF PER SHARE EARNINGS 1 Exhibit 11.1 POPE & TALBOT, INC. STATEMENT SHOWING CALCULATION OF AVERAGE COMMON SHARES OUTSTANDING AND EARNINGS PER AVERAGE COMMON SHARE
Three months ended Nine months ended September 30, September 30, ------------------------- ------------------------- 1995 1994 1995 1994 ---- ---- ---- ---- Weighted average number of common shares outstanding 13,363,779 13,362,729 13,363,433 13,024,349 Weighted average of common stock equivalent shares attributable to convertible debentures - - - 333,257 Application of the "treasury stock" method to the stock option plan 8,897 37,903 10,563 143,340 ----------- ----------- ------------ ----------- Total common and common equivalent shares, assuming full dilution 13,372,676 13,400,632 13,373,996 13,500,946 =========== =========== ============ =========== Net income (loss) $(6,645,000) $ 921,000 $(16,890,000)$ 12,310,000 Add: interest on convertible debentures, net of applicable income taxes - - - 244,000 ----------- ----------- ------------ ----------- Net income (loss), assuming full dilution $(6,645,000) $ 921,000 $(16,890,000) $12,554,000 =========== =========== ============ =========== Net income (loss) per common share, assuming full dilution $ (.49) $ .07 $ (1.26) $ .93 =========== =========== ============ ===========
The computation of primary net income per common share is not included because the computation can be clearly determined from the material contained in this report. EX-27.1 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE POPE & TALBOT, INC. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS SEP-30-1995 SEP-30-1995 4,475 0 64,214 0 92,482 182,498 582,129 305,031 494,914 80,671 177,152 13,972 0 0 192,406 494,914 503,629 503,629 494,935 494,935 0 0 10,695 (26,137) (9,247) (16,890) 0 0 0 (16,890) (1.26) (1.26)
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